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- 1 FSMB passed in the UK, recognizing digital assets and stablecoins as regulated financial activity.
- 2 King Charles approved the bill on June 29, 2023.
The UK passed the Financial Services and Market Bill (FSMB), recognizing digital assets and stablecoins as regulated financial activity. King Charles had approved the bill on June 29, 2023. It aims to regain control over the financial services rules that went haywire after Brexit.
Digital Assets Constitute Regulated Financial Activity in the UK
FSMB legislation will be extended to the Financial Services and Markets Act 2000 (FSMA), the core regulatory framework to police stablecoins and digital assets in the United Kingdom. For the first time, the bill would recognize digital assets and stablecoins as regulated financial activity in the country.
As per the government announcement, the bill “enables the regulation of crypto assets to support their safe adoption in the United Kingdom.” It would also help establish the sandbox facilities to test the credibility of upcoming technologies like blockchain in financial markets.
The FSMB provides a boost in power to the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). These agencies would require these powers to establish a regulatory framework, which the Treasury started consulting about in February 2023. Eventually, this would bring the United Kingdom closer towards comprehensive digital asset regulation.
The Treasury’s February 2023 consultation closed in April 202. This process laid the foundation to include digital asset activities into FSMA. The proposal from the Treasury was outlined in a consultation paper. Insiders say that the recent market events, including the infamous FTX-saga, influenced them.
Multiple bankruptcies, regulatory crackdowns in the US, and lack of a comprehensive regulatory framework in the United Kingdom were believed to be the driving factors behind the recent developments. The zest to mitigate the risks associated with digital asset businesses operating in the country is evident in the passing of this bill. It also aligns with the goal of the United Kingdom to become a global hub for digital currency.
The 340-page-long FSMB legislation was first introduced in July 2022. It was done to take advantage of Brexit’s freedom. The scenario provided domestic regulators with added powers over the financial system of the United Kingdom. The original version included stablecoin regulation under the country’s existing payment rules.
In October 2022, amendments were made to include and recognize digital assets as a regulated financial activity. The bill passed during its third reading in the House of Lords on June 19, 2023, it was then sent to the House of Commons to look for any possibility for amendments. The bill was sent for Royal Assent, and King Charles obliged on June 29, 2023.
FSMB vs. MiCA
The European Union’s Market in Crypto Asset (MiCA) is nearly 18 months away from its full implementation, with a multi-layered consultation process already underway. The comprehensive regulatory framework shall be executed on December 30, 2024, if all goes according to the plan. This would make the EU one of the significant jurisdictions to have regulation for the crypto industry.
The Financial Service and Market Bill (FSMB) does not possess the grandeur of the MiCA. It is also not a bill focusing on digital assets. It is designed as a general update on the current regulations on the United Kingdom’s financial sector. However, with FSMB, the country is much closer to the EU’s approach and far ahead of the US in the race for a regulatory framework for digital assets.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
